Industrial Policy for the Twenty-First Century

Dani Rodrik

No 4767, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Unlike what is commonly believed, the last two decades have not witnessed the twilight of industrial policy. Instead, incentives and subsidies have been refocused on exports and direct foreign investment, in the belief that these activities are the source of significant positive spillovers. The challenge in most developing countries is not to rediscover industrial policy, but to redeploy it in a more effective manner. This paper lays out an institutional framework for accomplishing this objective. A central argument is that the task of industrial policy is as much about eliciting information from the private sector on significant externalities and their remedies as it is about implementing appropriate policies. The right model for industrial policy is not that of an autonomous government applying Pigovian taxes or subsidies, but of strategic collaboration between the private sector and the government with the aim of uncovering where the most significant obstacles to restructuring lie and what type of interventions are most likely to remove them.

Keywords: Economic; growth (search for similar items in EconPapers)
JEL-codes: O10 O20 (search for similar items in EconPapers)
Date: 2004-11
New Economics Papers: this item is included in nep-dev and nep-pke
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Citations: View citations in EconPapers (470)

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